Madam Speaker, I want to speak in general terms about the whole aspect of the government's loaning money to small businesses.
I guess the reason the government first got into the business of loaning money to small businesses was that the banks simply refused to take on some of these ventures that had a little more risk involved in them.
We have to look deep down into the purpose of government's loaning money to small businesses. I think everyone will agree it is to encourage entrepreneurship, to put people to work in order to allow these people to flourish and perhaps even expand their businesses.
Some of the speakers today came up with instances where businesses had started in somebody's garage and then grown to nationwide and international businesses. That is exactly what I think is the optimum goal of getting into a situation where the government loans businesses money.
Everything we do here with regard to the Small Business Loans ACT should be pointed in that direction but I had a constituent who came to me the other day with an absolute horror story about borrowing money from the government. She is 58. She was involved in a government sponsored loans act. The Alberta Women's Enterprize Initiative Association loans money under western economic diversification. I realize that is not exactly what we are debating but it is along those same principles.
This lady went to the organization and asked to borrow some money. She needed approximately $60,000. It wrote her a contract for $60,000 at the rate of 17%. This was in 1996 at a time when if you had any collateral at all you could borrow money for 6% or 7%. Here it was saddling this person with a 17% interest rate. If that is helping small businesses it seems like a rather underhanded way to do it.
On top of that the lender chose not to release all the funds. No doubt it was written into the contract. The lender kept about half the funds the person borrowed and on which she was paying interest. Half the funds were kept on deposit in the financial institution from which she had borrowed the money.
If that is helping small business that is a little like throwing a drowning person a cement life saver. If going into a new business were not risky enough, withhold about half the capital borrowed and charge 17%.
By the time the lady came to see me it was too late for me to intervene. She had declared bankruptcy. They had foreclosed on absolutely everything she had. She had signed over her condominium, her life savings, her pension plan, everything she had as collateral toward this debt in order to get into business and be self-sufficient. Now she is basically a charity case. She has had to move in with her daughter and she is in a terrible predicament.
I felt very badly when this lady came to me and asked what I could do to help her.
The short answer was that I could do very little if anything to help. Likely I could do nothing. At the time she came to see me this case was before the courts. She is being sued for outstanding debt.
All I could do was sympathize with her and say that if I had the opportunity I would bring her case before parliament. She agreed that there was nothing I could do to intervene. She wondered if there was something that parliament could do to prevent this from happening to other unsuspecting people. She admits quite freely that she was not cautious enough. She should have read all the fine print. She definitely made some mistakes.
I think when we are talking about small business loan programs we should bear in mind what our ultimate goal is. If our goal is to help small businesses that had the other more established conventional lending institutions turn their backs on them, then we must make sure we are actually doing that and not simply putting a mill stone around these peoples' necks that they simply cannot carry.
We have to make sure taxpayers money is secured and that there is reasonable expectation for the business to flourish. I think the people who are borrowing money to invest in a business must prove they have expertise to carry on this business and that they have the necessary training, some rudimentary understanding of how business works, rudimentary accounting abilities and also have some good independent counsel available to them.
I would like to leave today thinking that the House and the committee considering this bill will bear in mind the burden placed on them to ensure this legislation is fair and does do what people such as the lady who came to see me expect it to do.